As Construction Picks Up, American Truck Makers Race
Economists look at many tea leaves as they try to determine the health of the economy. One of the most important surrounds vehicle sales, and more specifically pickup truck sales, which are tied to the construction industry. And as last month's sales rose 18 percent, the auto industry is betting big on a real estate rebound.
It's arguable that the Ford F-150 is the most important vehicle to come out of Detroit since the Model-T. It's also built on the same grounds as the old Model-T in Dearborn, Mich.
Standing between two separate assembly lines, the plant's manager, Brad Huff, explains how a truck comes together.
"The frame's built upside down, it gives us easy access," he says. "So, then the frame is built up and turned over. Then it comes here on this line where we pick up the tire and wheel. And then we wind up at the marriage station where the body meets the frame."
The F-150 has been the best-selling truck for 36 years in the U.S., and it's been the best-selling vehicle of any kind for 31 years. They build 7,500 trucks in the Dearborn plant per week. There are almost 600,000 types of permutations of the pickup, whereas cars usually have a couple hundred at most.
There are color, moon roof and trim options for the Ford pickups, and the list goes on. "I know it's hard to explain that it comes out to 600,000, but when you put all those different combinations together it comes right down to it," Huff says.
Now Ford is rumored to be introducing a new version of its pickup truck — the company had a concept vehicle premiering at the Detroit Auto Show. Doug Scott, marketing manager at Ford, won't say exactly when a new truck is coming, but he does say something big is on the way.
"Housing is the missing element," he says. "Housing is now coming back. We've seen over the last four, five months improvement in housing ... and all that is a bellwether and a great indicator for the full-size pickup business, so we're really optimistic."
While all U.S. auto companies are showing increases in car sales, it's a rebound in pickup trucks and real estate that really gets Detroit car executives excited.
"For every Ford F-series that's sold, they're making anywhere from [$6,000] to $8,000 in profit," says Alec Gutierrez, an analyst with Kelly Blue Book. "Whereas your average Fusion or Escape or Focus, they might be making [$800], maybe $2,000 in profit at most,"
Each of the car makers is poised to capture any uptick in new housing construction. Ram just released a new truck, General Motors is coming out with two of them and Ford executives are winking about something big in the works. Gutierrez says even the small housing gains can mean big money, truck-wise.
"As housing starts to improve and as commercial real estate starts to improve and just construction in general, that's where you really start to see strength in the pickup truck market as small businesses have to get these trucks so they can haul equipment and people back to the job sites," he says.
Before the auto bailouts and the economic collapse, almost all the profits from the Big Three came for trucks and SUVs. That has changed, especially for GM. But the pressure on GM is cooking in a different way than Ford. It's re-launching its Chevy Silverado and GMC Sierra this spring.
Kenn Bakowski, marketing manager at GM, says that automaker's new trucks are the most important product launches in the company's history, because GM has something to prove.
"So as you look for a company that's on the rebound — definitely on its way back — this is a big sign," Bakowski says. "That we can be competitive here and that we can win here — that's very important to us."
This is a race essentially between Ford and GM, with Ram a distance third and Japanese trucks bringing up the rear.
"Will we outsell our competitor in terms of full size pickups? That's our goal. We did in January. Are you looking for me to throw down the gauntlet? I think I just did," Bakowski says.
Ford and Chrysler say bring it on. And so the truck war begins.